Peak Oil: The Eventual End of the Oil Age

by Jonah Ralston, originally published by Washington University in St. Louis
| Nov 30, 2009

Below are the introduction and conclusions of a 2008 Master's project on peak oil. This directed research project was subjected to an oral defense in front of three faculty members at Washington University in St. Louis, and it is of the quality expected for a scholarly article. Please click here for the full paper.

INTRODUCTION:

The Industrial Revolution changed the fundamental organization of human societies. Agrarian communities became eclipsed by modern industrial cities. Transportation, industry, agriculture, communications, leisure, services, and nearly every facet of daily life have been revolutionized by the harnessing of fossil fuels. Currently, living a typical modern lifestyle is more dependent upon the combustion of hydrocarbons in fossil fuels than at any point in human history.

One fossil fuel of particular importance to modern society is oil. Humanity’s dependence upon a reliable and easily obtainable supply of oil places the modern lifestyle in a precarious position. Will this source of energy always be readily available? At what point will global production of this resource peak and then thereafter begin an irreversible decline? What would be the consequences of a peak in global oil production? With the demand for oil continuing to rise unabatedly, how will modern societies adapt if supply is unable to meet demand? What policies will governments implement in an attempt to address these issues?

These are difficult questions without easy answers. However, the implications of such questions for the organization of modern society are profound and deserve to be addressed in a manner that is easily conveyed to a wide audience. The analysis that follows will attempt to answer these questions by reviewing the phenomenon known as peak oil, when oil production peaks and then irreversibly declines. There are varying estimates as to when a global peak in oil production is likely to occur and these differing estimates will be discussed. Methodology will include Hubbert’s peak, named after geophysicist Dr. M. King Hubbert. The late Dr. Hubbert accurately predicted the peak of U.S. oil production and his peak theory has become a benchmark methodology in the formation of oil production curves.

Since modern society is so heavily reliant upon oil, there could be severe consequences associated with peak oil if it is not addressed in time. A scarcity of oil could have significant ramifications for global prices, modern transport, and international affairs. Few individuals would be protected from the effects of oil’s scarcity. At the international level, countries may adopt more belligerent foreign policies due to the increasing importance resources would have in national security concerns. These effects will be explored in further detail.

Will peak oil be adequately addressed by oil markets and private industry? Or will governments have a role to play in the management of an irreversible decline in the supply of oil? Peak oil may not result in a “doom and gloom” scenario if proper proactive steps are taken. Policy options are available now that governments can implement to mitigate the effects of peak oil, and these measures will be briefly outlined in the following analysis.

Peak oil is a phenomenon that has received little mainstream attention even though the potential consequences of its untimely arrival could be considerable. Since peak oil challenges the status quo, peak oil’s proponents have been subjected to an unfortunate backlash by established interests. It is hoped that this analysis will assist in bringing more attention and clarity to the issue. The better understanding that individuals and policymakers have of peak oil, the more likely it is that appropriate decisions will be made in preparation for the eventual end of the oil age.

CONCLUSIONS:

The 1859 drilling of the first commercial oil well by Colonel Edwin Drake in Pennsylvania marked a coming change in the way the world would use energy. Countries across the globe are now highly dependent upon oil, especially in the transportation sector. Due to rapid economic growth in the developing world and modern society’s extensive reliance upon internal combustion engines, demand growth for oil is likely to continue increasing throughout the world even in the face of a tight global oil market and high prices.

This increased world demand poses problems for providing an adequate global oil supply. Oil is a finite resource formed over millions of years. Its discovery and extraction are highly complex endeavors. In spite of advancing levels of technical sophistication in the oil industry and hundreds of billions of dollars of additional investment, discovery rates of new oilfields have been falling, reserves are being quickly depleted, and there are signs that world production may be beginning to plateau. These facts lead to the conclusion that the world will reach global peak oil, the point at which world oil production peaks and thereafter begins an irreversible decline, at some point in the not-too-distant future.

Peak oil is a real phenomenon and major objections to it do not hold up under closer examination. OPEC reserve figures are questionable and Saudi Arabia may not be able to produce as much oil as has been previously forecasted. Technology, though it will allow for more extraction of oil, will be unlikely to provide the substantial increases in oil supply that will be necessary to meet future demand because investment risks, underlying physical constraints, and production costs will likely remain too prohibitive. The economic incentives generated by higher oil prices will certainly push companies to produce more oil from both conventional and non-conventional sources, but these incentives will be unable to prevent oil from peaking because production has fundamental geological constraints that cannot be overcome. Government restrictions, such as those present in the U.S., can place slight limits on oil production but they are immaterial factors in the global oil market. Abiotic oil, though an interesting concept, is a scientifically invalid theory as indicated by the fact that no significant quantities of abiotic oil have ever been discovered in the approximately 150 years of commercial oil production.

Peak oil’s effects will be considerable. It will lead to higher global prices as petrochemical feedstocks become more expensive and more land is devoted to food for fuel at the expense of food for consumption. Modern transportation, a sector extremely dependent upon oil, will be significantly impacted. The increasing scarcity of oil could also have substantial effects on international affairs as energy issues become more prevalent in national security concerns. The adoption of more belligerent foreign policies may be the consequence.

The severity of peak oil’s effects can be mitigated by government policy. Government intervention is necessary because of the level of investment that will be needed to adequately address the problems posed by peak oil. Governments need to implement policies that foster the development of vehicle alternatives and promote the production of renewable energy. In addition, private citizens will need to adjust their lifestyles and governments should provide support for oil conservation measures that help them do so. The scale of the problem is immense and some degree of international coordination and cooperation will also likely be required. Peak oil presents many challenges to modern society, but with a strong commitment and the necessary resolve, countries can prepare for the eventual end of the oil age.

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